Common IRS Notices & How to Handle Them

Why Did The IRS Send Me a Notice?

There are various reasons why the IRS may send you a formal notice or letter by mail, including:

• You have a balance due.
• You are due a refund, but the amount differs from your tax return.
• The IRS has questions about your return.
• They need to verify your identity.
• The IRS needs additional information to process your return.
• They made changes to your return.
• There are delays in processing your return.

But, beware! Scammers are on the rise and are known to send fraudulent letters threatening legal action or jail time if you don’t contact them immediately. If the notice looks suspicious, do not respond. Instead, contact the IRS directly at 800-829-1040 to verify the notice is legitimate.

Types of IRS Notices

The IRS sends nearly 170 million notices to taxpayers every year. In general, they fall into one of the following categories:

• Information Requests – The IRS may need additional information before it processes your return, or it may need to verify your identity.
• Corrections/Adjustments – In some instances, the IRS makes changes to your return or the amount of your refund, typically due to math errors or other easy-to-correct mistakes.
• Balance Due – If you owe money, you’ll receive multiple notices indicating the amount owed, plus penalties and interest.
• Enforcement Actions – Failing to respond to a balance due notice can quickly escalate to enforcement actions, such as wage garnishment, tax liens, and tax levies.
• Audit Selection – If you’re return was selected for an audit, you’ll be notified by mail.

Common IRS Notices & How to Handle Them

Although there are hundreds of different notices, the list below contains some of the most common IRS notices sent. If you receive one of these, be sure to review what it means and pay close attention to the suggested next steps.

CP2000

IRS CP2000 is a return error notice. It is generally sent when the income reported on your return doesn’t match the information received from third-party sources. Another reason may be that you improperly claimed certain tax credits. This is not a bill or an audit notice. It is simply a summary of changes being made to your return.

Next Steps:

• If you agree with the changes, sign and date the response form. Mail it to the address on your notice with any payment due (if applicable).
• If you disagree, complete the response form and include an explanation why you don’t agree with the changes. Be sure to include any supporting evidence and mail it to the address provided.

Failure to respond (agreeing or disagreeing) by the deadline date will result in the IRS making the proposed changes. If you owe a balance, you’ll receive a Notice of Deficiency, followed by a final bill.

CP14

CP14 is an IRS collections notice. If you’re receiving this tax notice, you have a balance due but did not pay your taxes. The notice will contain a detailed summary of what you owe, including any penalties and interest, as well as any payments already made. If you ignore this notice, more will follow.

Next Steps:

• If you agree, pay the amount due by the deadline date.
• If you disagree, call the IRS at the number listed on your notice and speak with a representative.

In some cases, you may want to enlist the help of a tax professional. They can review your return for errors or missed deductions/credits, negotiate to lower penalty fees, and help get you into a payment plan, if needed.

CP501

IRS CP501 is also a collections notice. It is a reminder that you have unpaid tax debt, and you should take steps to correct the situation as soon as possible.

Next Steps:

• If you agree, pay the balance due immediately to avoid additional penalty and interest fees.
• If you disagree, contact the IRS to discuss your account.

Failure to pay your taxes by the requested deadline date will result in a Notice of Federal Tax Lien. The IRS may take other collection actions, as well.

CP504

IRS CP504 is known as a Notice of Intent to Levy. This is a serious letter that should not be ignored.

Next Steps:

• If you agree, make payment in full or apply for an installment agreement ASAP.
• If you disagree, contact the IRS to discuss your case.

You essentially have 30 days from the date of this notice to take action. Failure to respond means that the IRS can move forward with levying your paycheck, bank accounts, and even your retirement accounts.

C75

IRS CP75 is an audit notice. The IRS typically sends this notice when it needs additional information to verify your eligibility for certain tax credits, such as the Earned Income Credit (EIC). If you are due a refund, any portion of the tax credit in question will be frozen until you provide the requested information.

Next Steps:

• Mail the response form and requested documentation within 30 days of the notice date.
• Keep a copy of everything for your records.

If you need additional time, contact the IRS at the number listed in the notice. Once the IRS has the necessary information, it will review it and decide on any proposed changes.

CP90

IRS CP90 is a Notice of Intent to Levy. This means that the IRS plans to seize your assets to satisfy your tax debt if you don’t respond within 30 days. It also explains your right to a  Collections Due Process hearing before they take your property, wages, and/or bank accounts.

Next Steps:

• If you can’t pay the balance due by the deadline, request a payment plan immediately.
• To appeal the proposed levy, submit Form 12153, Request for a Collection Due Process or Equivalent Hearing, before the deadline date.

If you are facing severe financial hardship, you may want to speak with a tax professional and explore other tax relief options, such as Currently Not Collectible status or an Offer in Compromise.

Final Thoughts

If you receive a notice or letter from the IRS, there are three steps you should take immediately.

1. Read Your Notice – Always read and review your notice thoroughly. It will explain why you are receiving it, as well as what information you need to send to the IRS (if applicable). Pay close attention to any deadline dates!
2. Respond – Depending on the type of notice you receive, you may need to complete a response form and submit supporting documentation. If you are unable to do so within the timeframe provided (deadline date), be sure to contact the IRS at the number listed on your notice. Keep in mind that failure to respond by the specific date may jeopardize your appeal rights if you disagree with the changes made to your return or the amount owed.
3. Pay Your Balance – If this is a collections notice, you’ll need to submit payment in full by the deadline date to avoid additional interest and fees. You can also apply for a payment plan or other tax relief if needed.

Do not ignore your notice! Doing so will put you at risk for wage garnishment, tax liens, and levies. The IRS will use whatever means available to collect the debt.

If you need help determining your next steps or want to know which tax relief programs are available to you, contact Tax Defense Network at 855-476-6920. We offer a free, no-obligation tax consultation.